The Coming Revolution in Construction

While the Digital Revolution has already started to transform most parts of the economy, the construction industry is still operating in the twentieth century. Compared to other industries, it lags far behind in innovation. While information technology, lean processes, and automation have fueled huge increases in labor productivity in sectors like manufacturing, retail, and knowledge work, U.S. labor productivity has actually dropped in construction. Specifically, while non-farm labor productivity has gone up 153 percent in the U.S. since 1964, construction labor productivity has declined by 19 percent.

If the current trends continue, we’ll soon be zipping around in autonomous cars and drones while robots and software perform much of our work—and then we’ll return home to the buildings that are still constructed, as they were when our grandparents were children.

But all that could change if the construction industry applies new technologies and ideas that are now emerging.

The need for an upheaval in the industry is vast. Engineering and construction accounts for 6 percent of global GDP, and it is the largest consumer of raw materials.

At the same time, demand for new housing is soaring. According to the World Economic Forum (WEF), every day 200,000 people are added to the populations of the world’s cities, generating demand for affordable housing and urban infrastructure.1

According to the UN World Urbanization Prospects report, by 2050, about 70 percent of the world’s population will live in cities. In North America and Europe, the percentage will be 90 percent. Given the growing demand and the limited supply, prices are already inflated beyond the reach of millions of people. According to UN projections, one-fourth of the six billion people living in cities in 2045 will be forced to live in slums if nothing changes.2

According to the McKinsey Global Institute, the housing affordability gap is $650 billion per year, or 1 percent of global GDP. In some cities where prices are highest, the gap is more than 10 percent of local GDP. Building the housing needed by 2025 would require $9 trillion to $11 trillion in construction costs using today’s technologies and methods...